Downtown San Jose adds jobs but loses residents in post-COVID recovery

SAN JOSE — Downtown San Jose’s job market is holding steady after a catastrophic decline due to the coronavirus outbreak — but the number of people living in the city’s urban core has dwindled, a new report shows.

Ominously, the office vacancy rate for downtown San Jose is approaching its highest level on record and could jump further as new space comes on the market and leases expire, according to a report prepared for an upcoming meeting of a committee of the San Jose City Council.

Significant challenges beset downtown San Jose — yet the city’s urban core is gradually overcoming its coronavirus-spawned maladies and still entices office tenants, the new report from the city’s Economic Development and Cultural Affairs Office suggests.

Before the coronavirus outbreak, downtown San Jose boasted 43,000 jobs as of mid-2019, according to a previously released report from the city’s Economic Development Office.

Now, San Jose’s downtown has just 33,700 jobs as of mid-2023, the report states, a plunge of 21.6% from the mid-2019 time frame.

Nevertheless, the current number of downtown San Jose jobs as of 2023 is higher than both last year and two years ago, according to the report that was prepared for a meeting of the council’s community and economic development committee.

Last year, downtown San Jose had about 32,000 jobs, so the current number is up about 1,700 jobs or 5.3% from 2022, comparisons of current and prior city reports show.

Downtown San Jose is experiencing a net exodus of residents, however, the report determined.

In 2019, the year before the coronavirus outbreak and the final 12-month stretch before virus-linked business shutdowns began, an estimated 22,000 people were living in downtown San Jose, city staffers stated in a previous report to the City Council economic committee.

The number of downtown San Jose residents rose to 24,000 in 2021, declined to 23,000 in 2022 and slipped further to slightly fewer than 21,400 people living in the downtown as of mid-2023, prior city reports have stated.

The office vacancy rate represents another area of concern for downtown San Jose.

In the first quarter of 2023, downtown San Jose’s vacancy rate for office space was 23.6%, according to an estimate cited in the report that was prepared by Cushman & Wakefield, a commercial real estate firm.

The most recent office vacancy estimate for downtown San Jose was well above the 19.4% level in the first quarter of 2022. The current estimate is approaching the all-time high vacancy rate for downtown San Jose of 25.1%, which occurred in the first quarter of 2010, Cushman & Wakefield reported.

That vacancy rate could climb higher if two key office developments, 200 Park, a Jay Paul Co. project; and Platform 16, a Boston Properties project, arrive on the market without being pre-leased. Both of these projects are being marketed as state-of-the-art office hubs for tech companies.

Other factors could drive the vacancy rate to even worse levels.

“There are approximately 75 office leases comprising 525,000 square feet of space that will come up for renewal in the next 18 months,” the report stated.